September 27, 2006

Latino Labor Report 2006: Strong Gains in Employment

IV. Changes in Employment, 2005 and 2006

From the second quarter of 2005 to the second quarter of 2006, the working-age population (16 and older) in the U.S. increased by 2.8 million (Table 1). Most of this growth, 1.9 million, could be attributed to minorities, with Hispanics the single largest source. Total employment increased by 2.7 million in the same time period. Most of that gain, 1.6 million jobs, was also distributed among minority groups. Hispanic and Asian workers, two groups that are majority foreign-born, enjoyed considerable success in the past year. For non-Hispanic blacks and whites, the number of employed workers increased while the number of unemployed workers decreased, though both at a slower pace compared with Latinos and Asians.

Latino Hiring Boom

Latinos currently account for about 13% of the working-age population in the U.S. However, the growth in the Latino population 16 and older and labor force exceeded that of any other racial or ethnic group. Between the second quarters of 2005 and 2006, Hispanics were responsible for about 40% of the growth in the labor force. The growth in their numbers was matched by an improved economic outlook with significant employment gains for Hispanics, reductions in the number unemployed and a notable decline in the unemployment rate.

The Latino population 16 and older was 30 million in the second quarter of 2006 (Table 2). That represented an increase of 1.1 million, or 3.7%, since the second quarter of 2005. The Hispanic labor force grew by 867,000 (4.4%), from 19.9 million to 20.7 million. Employment rose by 993,000 (5.3%), from 18.7 million to 19.7 million. The number of unemployed Hispanics decreased by 126,000 (11%), from 1.1 million to 1 million. At the same time, the unemployment rate dropped from 5.8% to 4.9%, the employment rate increased from 64.8% to 65.8%, and the labor force participation rate increased from 68.7% to 69.2%.

Compared to all workers, gains in demographic indicators for Hispanics were often considerably higher. For Latinos, the growth in the labor force was about three times what it was for all workers—4.4% versus 1.4%. Similarly, employment growth for Hispanics (5.3%) was nearly three times the increase of 1.9% in total employment growth. A key economic indicator—the unemployment rate in 2006—was slightly higher among Hispanics (4.9% vs. 4.6% overall), but compared to all workers Hispanics experienced a greater decline in unemployment rate between 2005 and 2006.

The employment gains for Hispanics were also higher than in the previous 12- month period (the second quarter of 2004 to the second quarter of 2005), when it was 749,000. The decrease in the number unemployed was also greater—126,000 in the 2005-06 time period compared with 113,000 in the previous year.

The Latino unemployment rate, which fell by 0.8 percentage points in 2005-06, had fallen by the same amount in 2004-05. Over the past two years, the Hispanic unemployment rate has decreased by a total of 1.6 percentage points—from 6.5% in the second quarter of 2004 to only 4.9% in the second quarter of 2006. The gains in employment outcomes have considerably narrowed the gap between Hispanic and non-Hispanic white workers in recent years.

Gains for Whites

Non-Hispanic white workers constitute by far the largest segment of the labor market. Between the second quarters of 2005 and 2006, non-Hispanic white workers also showed improvement in employment outcomes. But the growth of the working-age population was slower, in percentage terms, for whites. That demographic trend translated into a relatively slow rate of increase in employment.

The non-Hispanic white population 16 and older was 158 million in the second quarter of 2006, an increase of 928,000, or 0.6%, since the second quarter of 2005 (Table 3). The labor force for non-Hispanic whites increased by 781,000 (0.8%), from 104 million to 104.8 million. Employment rose by 1 million (1%), from 99.8 million to 100.8 million. The number of unemployed non-Hispanic whites decreased by 243,000 (5.7%), from 4.3 million to 4.1 million. The unemployment rate dropped from 4.1% to 3.9%, the employment rate increased from 63.4% to 63.7% and the labor force participation rate nudged up from 66.2% to 66.3% in the past year.

Demographic trends show that the relative size of the non-Hispanic white working-age population is shrinking. Between the second quarters of 2005 and 2006, the white population 16 and older grew at half the rate of all workers— 0.6% compared with 1.2%. The same is true for the growth in the white labor force and employment compared with all workers. Even though whites constitute nearly 70% of the U.S. labor force, the increase in their employment (1 million) was less than 40% of the total increase (2.7 million) in employment in 2005-06.

Turning to economic indicators, non-Hispanic whites had a considerably lower unemployment rate compared with all workers—3.9% versus 4.6%. The unemployment rate for non-Hispanic whites fell by 0.3 percentage points in 2005- 06 compared to 0.4 percentage points in 2004-05. Over the past two years, the non-Hispanic white unemployment rate decreased by a total of 0.7 percentage points—from 4.6% in the second quarter of 2004 to 3.9% in the second quarter of 2006. The gains in employment outcomes, however, have not been as pronounced as they have been among Hispanics. As a result, the gap between the unemployment rates for non-Hispanic whites and Hispanics has narrowed rapidly in recent years.

For Blacks, Uneven Results

Black workers also experienced gains between the second quarter of 2005 and the second quarter of 2006. The drop in their unemployment rate was particularly notable. But the economic recovery for blacks was uneven. Blacks, for example, were the only group to experience a decline in the labor force participation rate.

The black working-age population was 26 million in the second quarter of 2006, an increase of 430,000 since the second quarter of 2005 (Table 4). The labor force for blacks increased by 156,000 (0.9%), from 16.6 million to 16.8 million. Employment rose by 294,000 (2%), from 15 million to 15.3 million. The number of unemployed blacks decreased by 137,000 (8.4%), from 1.6 million to 1.5 million. The unemployment rate dropped from 9.9% to 9%, the employment rate increased slightly from 58.6% to 58.8%, and the labor force participation rate decreased from 65% to 64.5%.

By most measures, black workers had a successful year in the labor market. The drop in their unemployment rate (0.9 percentage points) was the largest among all racial and ethnic groups. However, at least part of that decrease was due to a fall in the labor force participation rate. As relatively fewer workers seek work, the number unemployed and the unemployment rate tend to decrease. Economists point to a number of reasons that labor force participation and employment rates for blacks are relatively low. Holzer (2006) argues that the key problems facing black workers are low levels of education, discrimination, migration of jobs away from central cities, incarceration and child support obligations.

Asians

Non-Hispanic Asians Latinos account for about 5% of the working-age population in the U.S. But the rate of growth in their population and labor force nearly matches that of Hispanics. Asian workers, like their Hispanic counterparts, also experienced significant economic gains. The unemployment rate for Asian workers was the lowest of any racial or ethnic group.

The Asian population 16 and older was 10.4 million in the second quarter of 2006, an increase of 350,000 (3.5%) since the second quarter of 2005 (Table 5). The number of Asians in the labor force increased by 283,000 (4.3%), from 6.6 million to 6.9 million. Employment of Asians increased by 306,000 (4.8%), from 6.4 million to 6.7 million. The number of unemployed Asians decreased by 23,000 (8.6%), from 264,000 to 242,000. The unemployment rate dropped from 4% to 3.5%, the employment rate increased from 63.2% to 64%, and the labor force participation rate increased from 65.8% to 66.3%.

In terms of the three major economic indicators, Asian workers most resembled whites. Their labor force participation rates and employment rates were similar, and they were the only two groups with unemployment rates less than 4%. However, Asians and whites differed in one critical demographic dimension. Driven by immigration, the Asian working-age population and labor force grew at nearly six times the rate for white workers. Like Hispanic workers, Asians will play an increasingly important role in the U.S. labor market in the near future.